BANGALORE: Brazil's promise as a market as well as a near shore delivery location for Indian IT companies remains largely unfulfilled as the country struggles with economic and political uncertainty.

Brazil, once seen as one of the fastest growing emerging economies, is fighting to revive its economy in a year it faces an election and plays host to the football world cup while preparing to host the Olympics just two years down the line. Indian players are also circumspect about South America's biggest nation where the twin challenges of language and local competition makes the market that much more difficult to crack.

"The Brazilian market has turned out to be tricky for the Indian service providers. While some of them like TCS and Infosys have got it right, many others are still trying to cement their specific strategies," said Anupam Govil, a partner at Avasant, which advises IT services firms on market strategies. "The market is very expensive for nearshore delivery," said Ganesh Natarajan, vice chairman and CEO of Pune-based Indian outsourcing services provider Zensar Technologies.

Natarajan added: "A lot of companies (also) entered the market with the view of leveraging the domestic demand ... companies that entered the market two to three years back could not scale up and remained stagnant."

According to the Brazilian Association of Software Companies (ABES), and research firm IDC, in 2012, the Brazilian software and services market touched $27.1 billion in revenues, and the exports were at $2.24 billion, growing by 26.7 per cent over previous year.

The domestic market for IT investments was said to touch $25 billion in 2013, growing over 10 per cent from 2012. Demand for IT from sectors including mining, retail, agriproducts and manufacturing remains largely untapped.

This untapped demand, coupled with the IT needs of the World Cup and the Olympics seemed like the perfect mix. Most companies entered the market as it also offered a large resource pool and a stable and growing economy. All this, however, didn't pan out as the economy unravelled.

Companies had also sought to take advantage of locally available talent in emerging technologies and multi lingual capabilities. For instance Tech Mahindra acquired a small firm ComplexIT that specialised in SAP's business management software.

However, poor policy, especially during 2012-2013 by the ruling Workers Party which has been in power for over 10 years, has affected almost all key industries, in turn having a domino effect on the IT industry, Avasant's Govil said. According to the World Bank's latest Ease of Doing Business rankings, Brazil improved its position by two places only to reach 116 out of 189 economies in the Latin America and Caribbean region.

"The market has lost some of its sheen," Avasant's Govil said. Infosys, which started in Brazil in 2009, has over 700 staff in the country. The company has only recently announced a small expansion, with a centre that will have 25 employees, serving a specific local customer Citrosuco.